Bobby's Dilemma

Many Carnival parades keep their themes and their royalty a closely guarded secret until the day of their public processions. Some never reveal their monarchs. Such "mystik-ness" is part of Mardi Gras tradition.

That's fine for Comus, but not for a governor who wants to make major changes in the state tax code. Public policy must always be made in public, with lots of time for debate and tinkering as part of the legislative process. So far, Gov. Bobby Jindal is keeping details of his proposed tax plan under tight wraps, though bits and pieces of potential ideas have leaked out.

Jindal long ago figured out the easy part: He wants to eliminate Louisiana's personal and corporate income taxes and corporate franchise fee. He also wants the plan to be "revenue neutral," which means he and state lawmakers must find a substitute revenue source (or several sources) to make up the $3 billion or so that the income taxes and franchise fee bring in each year.

The second half of that equation is the hard part. In fairness to Jindal, he is talking (and hopefully listening) to a lot of folks as he searches for the right formula. So far, he is said to favor raising the state sales tax (in the range of 1.8 cents on the dollar from the current 4 cents), eliminating many of the exemptions and exclusions to the state sales tax, and raising the cigarette tax by more than $1 a pack.

Never mind that two years ago he vetoed legislative renewal of an existing 4-cents-a-pack cigarette tax on the grounds that it was a "tax increase." No doubt he'll argue that this time it's all about revenue neutrality, but two years ago it was "revenue neutral" as well, because it was an existing tax set to expire. But I digress.

Most folks have no problem with hiking a cigarette tax. Smoking is bad for everyone; it causes cancer and costs the state many millions to treat smoking-related illnesses.

Raising the general state sales tax rate and eliminating exemptions are another matter. Several folks who have met with Team Jindal to discuss the governor's proposal say he seems determined to achieve revenue neutrality via sales taxes. He does not want to hear about other taxes, they say.

That's too bad, because there are any number of ways the state can generate $3 billion. At some point, Jindal may have to bend, because resistance to a sales taxes hike appears to be growing. One veteran House member tells me there's no way the House will find the two-thirds super-majority needed to pass it. On top of that, Jindal's approval rating is at an all-time low. A recent survey conducted for the Louisiana State Medical Society showed the governor with only a 46 percent "positive" rating among voters and a 48 percent "negative" rating. That's hardly the kind of firm ground a governor needs to launch a tax increase.

In addition to his flagging political fortunes and anticipated criticism that sales taxes are regressive (i.e., they disproportionately burden the poor), raising the state sales tax forecloses local governments' best option for raising revenue. Even if they don't buy the "regressive" argument, many legislators will get pressure from back home not to cut off local governments' most viable means of supporting themselves, particularly when the state has so many other options.

For example, the state could adjust its severance taxes, or consider a tax on proven oil and gas reserves. It could raise gasoline taxes in addition to the tobacco tax. It could consider various excise taxes — or even a flat, very low income tax — just to name a few.

If Jindal insists on eliminating all income taxes, he may have to compromise his sales-taxes-only approach to achieving revenue neutrality. After all, his ambitions require that he eliminate income taxes — not necessarily that he raise sales taxes.

He has another dilemma: the clock is ticking. Jindal needs to put forth a "final" plan soon — preferably by early March — to give lawmakers and the public time to study it. He may be governor, but he ain't Comus.